2nd Mar 2005 07:02
Rathbone Brothers PLC02 March 2005 2nd March 2005 Rathbone Brothers PlcPreliminary results for the 12 months to 31st December 2004 Rathbones announces strong growth in profits and funds under management Rathbone Brothers Plc, a leading provider of discretionary fund management andwealth management services for private clients and trustees, announces itspreliminary results for the 12 months to 31st December 2004. Mark Powell, Chairman of Rathbone Brothers Plc, commented: "Profits before tax(before exceptional gains and goodwill amortisation) increased by 32.0% over2003 to £26.0 million and earnings per share (before goodwill amortisation) by22.8% to 46.79p. Total funds under management rose by 13.2% to £7.7 billion. "2004 was a year of real progress for Rathbones, against a background of a muchcalmer stock market than had been the case in 2003. We continue to attract newclients and new funds in our core businesses, and to build our profile and ourrelationships with intermediaries - an increasingly important source of newbusiness. "Rathbone Unit Trust Management continues to flourish with funds undermanagement reaching £916m as at the end of February this year. We have welcomedPeter Pearson Lund, the chief executive of our unit trust division, to the boardand he joins our other new board appointment - Sue Desborough - who becamefinance director in October 2004 when Andy Pomfret was appointed to the chiefexecutive role. "2005 has so far seen a further welcome improvement in world equity marketsdespite continuing currency uncertainties. Provided that markets do notdeteriorate, we can look forward to further growth in all parts of our business.We are confident that we have the professional skills, management andoperational capability to achieve our medium term objective of becoming theleading independent private client wealth management firm in the UK." Highlights: • Operating income increased by 16.4% to £95.2m (2003: £81.8m).• Operating profit before goodwill amortisation of £26.0m, an increase of 32.0% (2003: £19.7m).• Operating profit after goodwill amortisation was £20.1m, an increase of 41.5% (2003: £14.2m).• Total funds under management increased by 13.2% to £7.7 billion compared with an increase in the FTSE 100 Index of 7.5% over the same period.• Funds under management in Rathbone Unit Trusts increased by 72.2% over the period to £818m as at 31 Dec 2004.• Operating profit before goodwill amortisation in the Trust Division was £3.0m compared to £2.2m in 2003.• Earnings per share before goodwill amortisation rose by 22.8% to 46.79p (2003: 38.11p). Earnings per share after goodwill amortisation rose by 33.9% to 32.23p (2003: 24.07p).• Recommended final dividend is increased to 17.0p, making a total of 27.5p (2003:26p) for the year - an increase of 5.8%. For further information contact: Rathbone Brothers Plc 020 7399 0000 (Switchboard)Mark Powell, ChairmanAndy Pomfret, Chief ExecutiveEmily Morris, Marketing Director Financial DynamicsGeoffrey Pelham-Lane 020 7269 7194Andrew Waterworth 020 7269 7127Ed Gascoigne-Pees 020 7269 7132 CHAIRMAN'S STATEMENT I am delighted to present our results for the year ended 31st December 2004.2004 was a year of real progress for Rathbones, against a background of a muchcalmer stock market than had been the case in 2003. Operating income rose by16.4% to £95.2 million. Profits before tax, before exceptional gains andgoodwill amortisation are £26.0 million, an increase of 32.0% over 2003 andearnings per share (before goodwill amortisation) are 46.79p compared with38.11p in 2003, an increase of 22.8%. Profits before tax rose from £15.2 millionto £20.9 million. Earnings per share (after goodwill amortisation) rose from24.07p to 32.23p, an increase of 33.9%. It is recommended that the final dividend be increased to 17p, making a total of27.5p for the year, an increase of 5.8% over the total in respect of 2003. During 2004 funds under management grew by 13.2% to £7.7bn. This reflectedgrowth in all parts of our investment management business but especially withinRathbone Unit Trust Management where funds grew by 72% to £818 million. Thisreflects some excellent performance in our funds and increasing industryrecognition supported by an effective sales and marketing effort. Within therest of investment management, funds under management rose by 9.1%. The FTSE/APCIMS Balanced Index (which we regard as the most appropriate benchmark for ourassets under management) rose by 6.5% and the FTSE 100 Index rose by 7.5%.Our trust division made significant moves forward in 2004. The largest part -Rathbone Trust Company Jersey - had an excellent year and plans are now inprogress to move all of our people into one headquarters building in St Helierin 2006. Refocusing our Geneva office has made encouraging progress under theleadership of the new managing director and we anticipate that this process willcontinue in 2005. Within the UK, our trust division seeks to expand its familyoffice activities and to increase its provision of tax and trust services to ourinvestment management clients. Profits before tax, before exceptional items andgoodwill amortisation in the trust division for the year rose by 31.5% to £3.0million. For most of the past decade, private investors have centred their attentions,entirely understandably, on the suitability and performance of theirinvestments. Increasingly they are once more equally exercised by the cumulativeeffects of a range of tax and policy changes by the Inland Revenue. Inheritancetax liabilities arising from an estate are uppermost in many investors' minds,reflecting the rise in residential property prices in particular. Capital gainstax continues to distort investment decision making and reduce choice, as wellas being an extremely expensive tax to collect, even without the costs ofcompliance with it which are incurred by investors. It is particularly disappointing that the Chancellor of the Exchequer did notrespond to pressure to retain the income taxation advantages of IndividualSavings Accounts. At a time when there is a widespread acknowledgement of theneed to increase the habit of savings in the UK through pensions and in otherways, it is important to stress the relationship between saving and taxation. 2004 saw some extremely important changes in the make up of our executivemanagement team. At the end of September, Roy Morris retired after 47 yearsservice with Rathbones. He has made an enormous contribution to the organisationduring his career, particularly since his appointment as chief executive in1997. His contribution has been made in an unfailingly good humoured way and weare pleased that his advice will continue to be available to us, as he remainson the Board as a non-executive director. His place as chief executive has been filled by Andy Pomfret, who had beenfinance director since he joined us in 1999, a role that he filled with greatdistinction. Following a competitive external search, Sue Desborough wasappointed to succeed Andy as finance director. Sue had been our group financialcontroller since she joined us in 2000 from Kleinwort Benson. Both Andy and Sueare already making a very positive contribution to Rathbones in their new rolesand we believe that their appointments underline the strength of the executivemanagement team. In January 2005, we announced the appointment of Peter Pearson Lund to theBoard. As chief executive of Rathbone Unit Trust Management Limited he has ledthe creation of what is now a very meaningful business for Rathbones whichcontributes to our profits, our investment process and our reputation. The early weeks of 2005 have been characterised by a great deal of comment andspeculation about further consolidation in the investment management sectorgenerally and that part of it which specialises in investment managementservices for private investors in particular. On 14th January 2005, we announced that we had made an approach to Rensburg plc,a well regarded UK private client wealth management firm. Despite extensivediscussions with the senior management of Rensburg, it has not so far beenpossible to obtain their Board's recommendation. During the last 15 years Rathbones has sought to grow its investment managementbusiness through a combination of organic growth, the recruitment ofacknowledged private client specialist fund managers and acquisition. Atdifferent times during this period one or more of these routes to growth haveseemed more attractive. We have, however, always had in mind the need todemonstrate that recruitments or acquisitions would be earnings enhancing otherthan in the relatively short-term and enhance our client base or our serviceoffering to clients. We remain constant to that philosophy. 2005 has so far seen a further welcome improvement in world equity marketsdespite continuing currency uncertainties. Provided that markets do notdeteriorate, we can look forward to further growth in all parts of our business.We are confident that we have the professional skills, management andoperational capability to achieve our medium term objective of becoming theleading independent private client wealth management firm in the UK. Mark PowellChairman 2 March 2005 Consolidated profit and loss accountfor the year ended 31st December 2004______________________________________________________________________________ 2004 2003 Notes £'000 £'000______________________________________________________________________________Interest receivable- interest receivable and similar income arising from debt securities 16,294 14,399- other interest receivable and similar income 4,465 3,552 Interest payable (10,477) (7,968)______________________________________________________________________________Net interest income 10,282 9,983Dividend income 3 915 62Fees and commissions receivable 83,818 72,117Fees and commissions payable (4,276) (2,228)Other operating income 3 4,465 1,843______________________________________________________________________________Operating income 95,204 81,777Administrative expenses (66,599) (58,802)Depreciation and amortisation (8,512) (8,661)Other operating charges - (17)Provisions for bad and doubtful debts 14 (132)______________________________________________________________________________Operating profit 20,107 14,165 Operating profit before goodwill amortisation 26,034 19,745Goodwill amortisation (5,927) (5,580) Exceptional gains on sales of investment securities 11 759 1,088______________________________________________________________________________Profit on ordinary activities before tax 20,866 15,253 Tax on profit on ordinary activities 4 (7,737) (5,685)______________________________________________________________________________Profit on ordinary activities after tax 13,129 9,568 Equity dividends paid and proposed 5 (11,221) (10,524)______________________________________________________________________________Retained profit/(loss) for the year 1,908 (956)______________________________________________________________________________Dividends per ordinary share 5 27.5p 26.0p Earnings per ordinary share 6Basic 32.23p 24.07pDiluted 31.63p 23.86pBasic before goodwill amortisation 46.79p 38.11pDiluted before goodwill amortisation 45.91p 37.77p______________________________________________________________________________ There is no difference between the profit on ordinary activities before taxationand the result for the year above and their historic cost equivalents. Operating income, operating profit and the exceptional gains on sales ofinvestment securities all derive from continuing operations. Consolidated balance sheetas at 31st December 2004______________________________________________________________________________ 2004 2003* Note £'000 £'000______________________________________________________________________________AssetsCash and balances at central banks 15,840 3,205Settlement balances 11,199 13,523Loans and advances to banks 57,881 43,207Loans and advances to customers 41,226 36,353Debt securities 381,119 333,002Equity shares 7 35 35Intangible fixed assets 51,812 57,702Tangible fixed assets 5,625 6,226Other assets 4,528 4,245Prepayments and accrued income 19,482 17,666______________________________________________________________________________Total assets 588,747 515,164______________________________________________________________________________LiabilitiesDeposits by banks 3,243 5,335Settlement balances 15,238 11,376Customer accounts 425,078 366,715Debt securities in issue 286 898Other liabilities 8 20,571 15,637Accruals and deferred income 13,033 8,560Provision for liabilities and charges 9 713 741 Called up share capital 2,043 2,033Share premium account 14,766 13,791Other reserves 49,428 49,428Profit and loss account 44,348 40,650______________________________________________________________________________Equity shareholders' funds 110,585 105,902______________________________________________________________________________ ______________________________________________________________________________Total liabilities 588,747 515,164______________________________________________________________________________* Comparatives restated - see notes 8 and 9 Memorandum itemsContingent liabilities- guarantees 902 912- assets pledged as collateral security 52 49______________________________________________________________________________ 954 961______________________________________________________________________________ Commitments- undrawn commitments to lend 3,253 4,182______________________________________________________________________________ Consolidated cash flow statementfor the year ended 31st December 2004___________________________________________________________________________________ 2004 2003+ Notes £'000 £'000 £'000 £'000___________________________________________________________________________________Net cash inflow/(outflow) 12 85,596 (22,934)from operating activities___________________________________________________________________________________Taxation- UK corporation tax (6,280) (5,120)- overseas tax (724) (506)___________________________________________________________________________________Net cash outflow for taxation (7,004) (5,626)___________________________________________________________________________________Capital expenditure and financialinvestments- purchase of investment securities (1,587,497) (1,962,667)- proceeds from sale and maturities of investment securities 1,540,139 1,994,214- purchase of tangible fixed assets (2,062) (1,903)- sale of tangible fixed assets 212 105___________________________________________________________________________________Net cash (outflow)/inflow for (49,208) 29,749___________________________________________________________________________________capital expenditure and financialinvestments Acquisitions and disposals- acquisitions of subsidiaries/ businesses (169) (4,970)- net cash acquired with subsidiary undertakings/ businesses - 70___________________________________________________________________________________Net cash outflow for acquisitions and disposals (169) (4,900)___________________________________________________________________________________Equity dividends paid (10,780) (10,319)___________________________________________________________________________________Net cash inflow/(outflow) before financing 18,435 (14,030)___________________________________________________________________________________Financing- issue of shares 12 745 3,466- purchase of shares for share based schemes (1,266) -- repayment of debt securities (611) (4,870)___________________________________________________________________________________Net cash (outflow) from financing (1,132) (1,404)___________________________________________________________________________________Increase/(decrease) in cash in the year 12 17,303 (15,434)___________________________________________________________________________________ + Comparatives restated see note 12(vi) Consolidated statement of total recognised gains and lossesfor the year ended 31st December 2004 ________________________________________________________________________________ 2004 2003 £'000 £'000________________________________________________________________________________Profit for the financial year attributableto equity shareholders 13,129 9,568 Currency adjustments (109) (207)________________________________________________________________________________Total recognised gains and losses for the year 13,020 9,361________________________________________________________________________________ Reconciliations of movements in equity shareholders' fundsfor the year ended 31st December 2004 ________________________________________________________________________________ 2004 2003 £'000 £'000________________________________________________________________________________Profit for the financial year attributable to equity shareholders 13,129 9,568Dividends (11,221) (10,524)________________________________________________________________________________Profit/(loss) for the financial year 1,908 (956)Currency adjustments (109) (207)Shares issued or to be issued 10 64Premium on shares issued 975 5,979Movement in relation to share based schemes 1,899 592________________________________________________________________________________Net addition to equity shareholders' funds 4,683 5,472 Opening equity shareholders' funds 105,902 100,430________________________________________________________________________________Closing equity shareholders' funds 110,585 105,902________________________________________________________________________________ Notes1 Principal accounting policiesThis preliminary announcement has been prepared on the basis of the accountingpolicies as set out in the published report and accounts for the year ended 31stDecember 2003 with the exception of the following additional policy: • Off Balance Sheet Financial Instruments Forward rate agreements ('FRAs') are used to manage interest rate risk. The netinterest paid or received on FRAs' is recorded on an accruals basis fromsettlement date and included within net interest in the profit and loss account. 2 Segmental information (a) Segmental information as required by Statement of Standard AccountingPractice 25 'Segmental reporting': ________________________________________________________________________________ Gross operating income Profit before tax 2004 2003 2004 2003 £'000 £'000 £'000 £'000________________________________________________________________________________By class of business:Investment management and banking 77,399 65,956 18,292 14,185Unit trusts 11,245 5,818 1,506 402Trust services 21,313 20,199 1,068 666________________________________________________________________________________ 109,957 91,973 20,866 15,253________________________________________________________________________________ Total assets Net assets 2004 2003 2004 2003 £'000 £'000 £'000 £'000________________________________________________________________________________By class of business:Investment management and banking 520,766 450,641 70,625 63,495Unit trusts 9,478 5,165 2,679 1,831Trust services 58,503 59,358 37,281 40,576________________________________________________________________________________ 588,747 515,164 110,585 105,902________________________________________________________________________________ Gross operating income Profit before tax 2004 2003 2004 2003 £'000 £'000 £'000 £'000________________________________________________________________________________By geographical segment:United Kingdom 89,780 74,867 17,993 12,670Jersey, Switzerland and other European countries 19,476 16,206 2,778 2,552The Americas 701 900 95 31________________________________________________________________________________ 109,957 91,973 20,866 15,253________________________________________________________________________________ Total assets Net assets 2004 2003 2004 2003 £'000 £'000 £'000 £'000________________________________________________________________________________By geographical segment:United Kingdom 530,677 458,371 77,189 70,318Jersey, Switzerland and other European countries 55,633 53,466 32,638 34,085The Americas 2,437 3,327 758 1,499________________________________________________________________________________ 588,747 515,164 110,585 105,902________________________________________________________________________________ Interest Dividend Fees and Other receivable income commissions operating receivable income 2004 2003 2004 2003 2004 2003 2004 2003 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000___________________________________________________________________________________Analysis ofgrossoperating incomeby geographicalsegment:United Kingdom 19,178 17,026 915 62 65,303 55,965 4,384 1,814Jersey, Switzerland andother Europeancountries 1,546 868 - - 17,863 15,314 67 23The Americas 35 57 - - 652 838 14 6___________________________________________________________________________________ 20,759 17,951 915 62 83,818 72,117 4,465 1,843___________________________________________________________________________________ (b) Additional segmental analysis: ___________________________________________________________________________________ Gross operating Profit before tax, Profit before income before exceptional tax and goodwill items and goodwill amortisation amortisation 2004 2003 2004 2003 2004 2003 £'000 £'000 £'000 £'000 £'000 £'000___________________________________________________________________________________By class of business:Investment management and banking 77,399 65,956 21,649 17,147 22,158 17,690Unit Trusts 11,245 5,818 1,431 352 1,506 402Trust services 21,313 20,199 2,954 2,246 3,129 2,741___________________________________________________________________________________ 109,957 91,973 26,034 19,745 26,793 20,833___________________________________________________________________________________ Gross operating Profit before tax, Profit before income before exceptional tax before items and goodwill goodwill amortisation amortisation 2004 2003 2004 2003 2004 2003 £'000 £'000 £'000 £'000 £'000 £'0000___________________________________________________________________________________By geographical segment:United Kingdom 89,780 74,867 21,460 15,839 22,219 16,535Jersey, Switzerland and other European countries 19,476 16,206 4,479 3,936 4,479 4,267The Americas 701 900 95 (30) 95 31___________________________________________________________________________________ 109,957 91,973 26,034 19,745 26,793 20,833___________________________________________________________________________________ Notes(i) Gross operating income and operating income are derived as follows: ________________________________________________________________________________ Year Year ended ended 31st December 31st December 2004 2003 £'000 £'000________________________________________________________________________________Interest receivable from debt securities 16,294 14,399Other interest receivable 4,465 3,552Dividend income 915 62Fees and commissions receivable 83,818 72,117Other operating income 4,465 1,843________________________________________________________________________________Gross operating income 109,957 91,973Interest payable (10,477) (7,968)Fees and commissions payable (4,276) (2,228)________________________________________________________________________________Operating income 95,204 81,777________________________________________________________________________________ (ii) The Group's banking activity relates almost entirely to clients in theinvestment management business and both banking and investment management aretreated as one segment for management and internal reporting purposes.Accordingly, in the opinion of the directors, it is more meaningful to presentsegmental information for these activities on a combined basis. (iii) The allocations by class of business and geographical segment of total andnet assets include goodwill of £51,812,000 (2003: £57,702,000) of which£27,408,000 (2003: £29,428,000) relates to trust services. (iv) In the opinion of the directors, there is no material difference betweenthe sales origin and destination of gross operating income and accordingly, thegeographic segmental analysis has been prepared on a sales origin basis only.None of the activities were discontinued in the current and previous years. Thetables include companies that have joined the Group with effect from the date oftheir acquisition. (v) Common costs and earnings on shareholders' funds have been allocated on thesame basis that is used for internal management reporting. Total and net assetshave been allocated on a legal entity basis which, in the main, reflects boththe 'by class of business' and 'by geographical segment' analyses. (vi) As the Group is not required to disclose turnover, no segmental analysis ofturnover is included above. 3 Dividend income and other operating income Dividend income comprises income from equity shares of £915,000 (2003: £62,000).In 2004, dividend income includes an amount of £825,000 which is the specialdividend of 55p per share paid by London Stock Exchange plc on 16th August inrelation to the Group's holding of 1,500,000 shares on the record date of 23rdJuly. Further details in relation to this holding are included in Note 7. Other operating income of £4,465,000 (2003: £1,843,000) includes £3,619,000(2003: £1,116,000) of net unit trust dealing profits. 4 Tax on profit on ordinary activities________________________________________________________________________________ 2004 2003 £'000 £'000________________________________________________________________________________Current tax:UK corporation tax on profits for the year 7,673 6,262Adjustments in respect of previous years 56 (395)________________________________________________________________________________ 7,729 5,867Foreign tax (including £5,000 (2003: £128,000) in respect of previous years) 898 749________________________________________________________________________________Total current tax 8,627 6,616________________________________________________________________________________Deferred tax:Origination and reversal of timing differences - current year (906) (923) - previous year 16 (8)________________________________________________________________________________Total deferred tax (890) (931)________________________________________________________________________________ 7,737 5,685________________________________________________________________________________ The tax charge for the year is higher than the standard rate of corporation taxin the UK of 30% (2003: 30%). The differences are explained below: ________________________________________________________________________________ 2004 2003 £'000 £'000________________________________________________________________________________Tax on ordinary activities at the standard rate 30% (2003: 30%) 6,260 4,576Effects of:UK dividend income (271) (15)Goodwill amortisation 1,706 1,601Leasehold property depreciation 81 80Disallowable expenses 179 75Share options exercised (124) (56)UK tax on overseas subsidiary dividends 285 352Lower tax rates on overseas earnings (445) (399)Under/(over)provision for tax in previous years 66 (529)________________________________________________________________________________Overall tax charge 7,737 5,685________________________________________________________________________________ Timing differences subject to deferred tax:Timing difference in relation to capital allowances and depreciation (31) 128Timing difference in relation to SSAP 24 pension cost 26 24Timing difference in relation to the share based payments 247 130Timing difference in relation to other incentive costs 648 649________________________________________________________________________________Current tax charge 8,627 6,616________________________________________________________________________________ 5 Dividends________________________________________________________________________________ 2004 2003 £'000 £'000________________________________________________________________________________Interim dividend of 10.5p per share on 40,721,015 shares(2003: 10p per share on 39,649,942 shares) 4,276 3,965Adjustment to interim dividend of 10.5p per share on 31,065 shares (2003: 10p per share on 425,946 shares) (3) 43Final dividend of 17p per share on 40,868,815 shares(2003: 16p per share on 40,668,642 shares) 6,948 6,507________________________________________________________________________________ 11,221 10,515Adjustment to previous year's final dividend - 9________________________________________________________________________________Total dividends 11,221 10,524________________________________________________________________________________ The interim dividend of 10.5p per share was paid on 15th October 2004 toshareholders on the register at the close of business on 24th September 2004. The final dividend declared of 17p per share is payable on 12th May 2005 toshareholders on the register at the close of business on 15th April 2005. 6 Earnings per share Basic earnings per share has been calculated by dividing the profitsattributable to shareholders of £13,129,000 (2003: £9,568,000) by the weightedaverage number of shares in issue throughout the year of 40,729,520 (2003:39,750,634). Diluted earnings per share is the basic earnings per share, adjusted for theeffect of contingently issuable shares under the Long Term Incentive Plan,employee share options remaining capable of exercise and any dilutive shares tobe issued under the Share Incentive Plan, weighted for the relevant period (seetable below). The directors believe that the provision of additional EPS figures, inparticular before goodwill amortisation, is beneficial to the users of thefinancial statements to understand the performance of the Group. Supplementarybasic and diluted EPS figures have been calculated to exclude the effect ofgoodwill amortisation of £5,927,000 included in operating administrativeexpenses (2003: £5,580,000). The average fair value of one ordinary share during 2004 was £7.30 (2003: £5.97)and the average exercise price of shares under option during 2004 was £4.51(2003: £6.71). _______________________________________________________________________________ 2004 2003 No. No._______________________________________________________________________________Weighted average number of ordinary shares inissue during the year - basic 40,729,520 39,750,634Effect of ordinary share options 333,709 243,661Effect of dilutive shares issuable under the Share Incentive Plan 174,606 110,897Effect of contingently issuable ordinary shares under the Long Term Incentive Plan 265,611 -_______________________________________________________________________________Diluted ordinary shares 41,503,446 40,105,192_______________________________________________________________________________ 7 Equity shares________________________________________________________________________________ 2004 2003 Directors' Directors' valuation/ valuation/ market market Cost value Cost value £'000 £'000 £'000 £'000________________________________________________________________________________Listed equity shares (see Note (b) below) - 6,402 - 5,025Unlisted equity shares (see Notes (c) and (d) below) 35 817 35 35________________________________________________________________________________ 35 7,219 35 5,060________________________________________________________________________________ (a) The equity shares are held as investment securities for continuing use inthe business. (b) The Group holds 1,100,000 (2003: 1,500,000) shares in London Stock Exchangeplc which are held in the balance sheet at cost (£2). On 26th July 2004, therewas a 6 for 7 share consolidation and the Group's holding of 1,500,000 shareswas consolidated to 1,285,714 shares. On 30th November 2004, the Group sold185,714 shares. (c) The Group holds 1,809 shares in Euroclear plc which are held in the balancesheet at cost of £30,000 (2003: £30,000). The Directors' valuation of £812,225has been derived from the unaudited net asset value per share provided by thecompany. (d) The Group holds 5,000 shares in an unlisted company which are held in thebalance sheet at a cost of £5,000 (2003: £5,000). 8 Other Liabilities ________________________________________________________________________________ 2004 2003* £'000 £'000________________________________________________________________________________Corporation tax 6,067 4,447Other taxes and social security costs 1,635 1,285Proposed dividend 6,948 6,507Other creditors 5,921 3,398________________________________________________________________________________ 20,571 15,637________________________________________________________________________________ * Comparative restated to reclassify corporation tax from provision forliabilities and charges 9 Provision for liabilities and charges________________________________________________________________________________ 2004 2003* £'000 £'000________________________________________________________________________________Deferred contingent consideration - 154Other 713 587________________________________________________________________________________ 713 741________________________________________________________________________________ * Comparative restated to reclassify corporation tax as other liabilities ________________________________________________________________________________ Deferred Legal Total Contingent and Consideration Other £'000 £'000 £'000________________________________________________________________________________As at 1st January 2004 154 587 741Charged to the profit and loss account - 370 370Unused amounts reversed (24) - (24)Amounts used (130) (244) (374)________________________________________________________________________________As at 31st December 2004 - 713 713________________________________________________________________________________ Further details on legal and other provisions have not been provided on thebasis that the directors consider that this would be prejudicial to theCompany's interests. 10 Pension schemes FRS 17 disclosuresWhilst the Group continues to account for pension costs in accordance withStatement of Standard Accounting Practice 24 'Accounting for pension costs',under FRS 17 'Retirement benefits' the following transitional disclosures arerequired: (i) The Group currently operates two funded pension schemes in the UK (theRathbone Scheme and the Laurence Keen Scheme) providing benefits based on finalpensionable salary. The Laurence Keen Scheme was closed to new entrants witheffect from 1st October 1999. The Rathbone Scheme was closed to new entrantswith effect from 1st April 2002. The assets are held in independent, trusteeadministered funds. The pension costs are assessed on the advice of the schemeactuaries using the projected unit method which looks at the value of benefitsaccruing over the years following the valuation date based on projected salaryto date of termination of service. (ii) The latest full actuarial valuations were conducted as at 31st December2001 (the Rathbone Scheme) and as at 31st December 2002 (the Laurence KeenScheme) and for the purposes of FRS17 disclosures the actuary has determined thefollowing information. The major assumptions used in these valuations were asfollows: _________________________________________________________________________________ Laurence Keen Scheme Rathbone Scheme 2004 2003 2002 2004 2003 2002_________________________________________________________________________________Rate of increase in salaries 3.65% 3.45% 3.00% 3.65% 3.45% 3.00%Rate of increase of pensions in payment 2.70% 2.60% 2.25% *2.70% *2.60% *2.25% Rate of increase of deferred pensions 2.90% 2.60% 2.25% 2.90% 2.60% 2.25%Discount rate 5.50% 5.60% 5.80% 5.50% 5.60% 5.80%Inflation assumption 2.90% 2.70% 2.25% 2.90% 2.70% 2.25%________________________________________________________________________________ * 5% for service prior to April 2001 The assumptions used by the actuaries are the best estimates chosen from a rangeof possible actuarial assumptions which, due to the timescale covered, may notnecessarily be borne out in practice. (iii) The fair value of the Schemes' assets, which are not intended to berealised in the short term and may be subject to significant change before theyare realised, and the present value of the Schemes' liabilities, which arederived from cash flow projections over long periods and are thus inherentlyuncertain, and the related tax effect are set out below: _______________________________________________________________________________________________________________ Laurence Keen Scheme Rathbone Scheme Long term rate of Long term rate of Laurence Rathbone 2004 2003 2002 return expected at return expected at Keen Scheme Total Total Total Scheme £'000 £'000 £'000 £'000 1.1.03 1.1.04 1.1.05 1.1.03 1.1.04 1.1.05 £'000_______________________________________________________________________________________________________________Equities 8.00% 7.70% 7.50% 8.00% 7.70% 7.50% 3,257 20,856 24,113 20,096 14,048Bonds 4.90% 4.80% 4.60% 5.80% 5.60% 5.50% 3,258 4,258 7,516 6,038 5,482Other 2.75% 4.60% 4.50% 2.75% 4.60% 4.50% 321 833 1,154 899 1,991_______________________________________________________________________________________________________________Total market value ofassets 6,836 25,947 32,783 27,033 21,521Present value of schemeliabilities (9,552) (38,214) (47,766) (40,877) (32,939)_______________________________________________________________________________________________________________Deficit in scheme (2,716) (12,267) (14,983) (13,844) (11,418)Related deferred taxasset 815 3,680 4,495 4,153 3,425_______________________________________________________________________________________________________________Net pension liability (1,901) (8,587) (10,488) (9,691) (7,993)_______________________________________________________________________________________________________________ (iv) If the above amounts had been recognised in the financial statements, theGroup's net assets and profit and loss reserve at 31st December 2004 would havebeen as follows: ________________________________________________________________________________ 2004 2003 £'000 £'000________________________________________________________________________________Net assetsNet assets excluding pension liability 110,585 105,902Pension liability (10,488) (9,691)________________________________________________________________________________Net assets including pension liability 100,097 96,211________________________________________________________________________________ReservesProfit and loss reserve excluding pension liability 44,348 40,650Pension liability (10,488) (9,691)________________________________________________________________________________Profit and loss reserve including pension liability 33,860 30,959________________________________________________________________________________ (v) Movement in deficit during the year ____________________________________________________________________________________ 2004 2003 Laurence Rathbone Total Laurence Rathbone Total Keen Scheme Keen Scheme Scheme Scheme £'000 £'000 £'000 £'000 £'000 £'000____________________________________________________________________________________ Balance at 1st January (3,051) (10,793) (13,844) (2,661) (8,757) (11,418)Movement in the year:Current service cost - (3,056) (3,056) - (2,588) (2,588)Contributions 562 2,576 3,138 33 2,557 2,590Other finance income (120) (245) (365) (128) (300) (428)Actuarial loss (107) (749) (856) (295) (1,705) (2,000)____________________________________________________________________________________Balance at 31st December (2,716) (12,267) (14,983) (3,051) (10,793) (13,844)____________________________________________________________________________________ (vi) The following amounts would have been included within operating profitunder FRS17:____________________________________________________________________________________ 2004 2003 Laurence Rathbone Total Laurence Rathbone Total Keen Scheme Keen Scheme Scheme Scheme £'000 £'000 £'000 £'000 £'000 £'000____________________________________________________________________________________Current service costs (employer's part only) - 2,280 2,280 - 1,808 1,808Past service cost - - - - - -____________________________________________________________________________________Total operating charge - 2,280 2,280 - 1,808 1,808____________________________________________________________________________________ (vii) Analysis of the amount credited to other finance income under FRS17: ____________________________________________________________________________________ 2004 2003 Laurence Rathbone Total Laurence Rathbone Total Keen Scheme Keen Scheme Scheme Scheme £'000 £'000 £'000 £'000 £'000 £'000____________________________________________________________________________________Expected return on pension scheme assets 369 1,616 1,985 319 1,210 1,529Interest on post retirementliabilities (489) (1,861) (2,350) (447) (1,510) (1,957)____________________________________________________________________________________Net return (120) (245) (365) (128) (300) (428)____________________________________________________________________________________ (viii) The actuarial loss can be analysed as follows: ____________________________________________________________________________________ Laurence Keen Rathbone Scheme Scheme 2004 2003 2002 2004 2003 2002 £'000 £'000 £'000 £'000 £'000 £'000____________________________________________________________________________________Actual return less expected return on pension scheme assets 359 654 (700) 1,132 1,696 (4,064)Percentage difference between expected and actual return 5% 11% 13% 4% 8% 25%Experience gains and losses arising on the schemeliabilities - - (725) - - 38Percentage of the present value of the scheme liabilities - - 9% - - 0.2%Total amount recognised in statement of recognised gains and losses (107) (295) (415) (749) (1,705) (132)Percentage of the present value of the scheme liabilities 1% 3% 5% 2% 5% 0.5%____________________________________________________________________________________ (ix) Analysis of amount recognised in statement of total recognised gains andlosses ("STRGL") under FRS17 ______________________________________________________________________________ Laurence Keen Rathbone Scheme Scheme 2004 2003 2004 2003 £'000 £'000 £'000 £'000______________________________________________________________________________Actual return less expected return on scheme assets 359 654 1,132 1,696Experience gains and losses arising on scheme's liabilities - - - -Loss due to changes in assumptions under the FRS17 value of scheme liabilities (466) (949) (1,881) (3,401)______________________________________________________________________________Actuarial loss recognised in the STRGL (107) (295) (749) (1,705)______________________________________________________________________________ (x) The total regular contributions made by the Group to the Rathbone Schemeduring the year were £1,800,000 (2003: £1,777,000) based on 11.5% of pensionablesalary. No additional lump sum contributions were paid in 2004 (2003: £nil).Future employer contributions will continue at the rate of 11.5% of pensionablesalaries. Given that after 31st March 2002 the Rathbone Scheme was closed to newentrants, the current pension cost will increase as the members of the Schemeapproach retirement. The total contributions made by the Group to the Laurence Keen Scheme during theRelated Shares:
Rathbone